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Electoral bonds: What's the controversy?

Electoral bonds were introduced by the Modi government as an alternative to cash donations made to political parties but the instrument is now at the centre of a controversy over allegations that it is not only skewed towards the ruling party, but flouts the concept of free and transparent elections

By BusinessToday.In

Friday, April 12, 2019

The Supreme Court on Friday asked all political parties to furnish receipts of electoral bonds along with identity and bank account details of the donors and the amounts received in a sealed cover to the Election Commission by May 30. The order - passed on a petition filed by NGO Association of Democratic Reforms (ADR) - takes a swing at the inherent anonymity of the scheme introduced by the Modi government in the last fiscal as an alternative to cash donations made to political parties. Here's all you need to know about electoral bonds:

What are electoral bonds?

This is a bearer instrument in the nature of a Promissory Note that is payable to the bearer on demand and is interest-free. The concept of electoral bonds was introduced by the Modi government in the Finance Bill 2017, and facilitated through multiple amendments in the Finance Act 2017. The idea was to increase transparency in political funding and curb the usage of black money. The Centre subsequently notified the Electoral Bonds Scheme in January this year.

According to the notification, electoral bonds can be purchased by any citizen of India - singly or along with other individuals - or a body incorporated in India. Only registered political parties that secured at least 1% of the votes polled in the last general elections are eligible to receive this instrument, which can be encashed by eligible parties only through bank accounts in authorised banks, currently only SBI.

The instrument is issued in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore and its sale is opened once in every quarter for 10 days, and for a month ahead of general elections or as notified by the government. They are valid for only 15 days. Citing an RTI response, IANS recently reported that SBI sold electoral bonds worth Rs 1,716 crore in January and March this year against the Rs 1,056 crore of bonds sold in six months in 2018, signalling that the bulk of political donations are being made through this route.

How does it work?

To purchase this instrument, you have to submit the Electoral Bond Application Form along with the deposit slip, citizenship and KYC documents and your cheque or demand draft at any authorized SBI Branch. Alternatively, you can visit the SBI website to buy this instrument online through NEFT/RTGS (https://merchant.onlinesbi.com/mopsprelogin/initiateelectroralbond.htm). The sale of first batch of electoral bonds took place over March 1-10, 2018.

Is this instrument unique to India?

Jagdeep Chhokar, founder member and trustee, Association for Democratic Reforms (ADR), non-profit election research group, told News18 that while there have been electoral trusts in India, the concept of electoral bonds is new. If fact, experts are reportedly unable to recall any such approach to party funding practiced in any democracy around the world.

What's the controversy all about?

The instrument finds itself in the centre of a major controversy over allegations that it is not only skewed towards the ruling party, but flouts the concept of free and transparent elections. According to ADR, a deep look at the tax declarations of various political parties to the Election Commission revealed that funding through electoral bonds is skewed heavily towards national parties, with the BJP walking away with the lion's share. Of the Rs 215 crore generated through this route in 2017-18, the ruling party secured Rs 210 crore and the opposition Congress Rs 5 crore, the ADR report added.

While arguing ADR's case against electoral bonds in Supreme Court on Wednesday, activist lawyer Prashant Bhushan, appearing for the NGO, referred to the alleged deficiencies in the scheme and said that it was a "retrograde" step as it was against the concept of free and transparent elections. He added that the instrument may be the "kickbacks" to the ruling political parties and referred to the replies of the Election Commission underscoring that the changes made in the law will have serious repercussions on the transparent funding of political parties.

The ADR reportedly also claims that the four amendments carried out in different Acts to pave the way for electoral bonds have "opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies, which can have serious repercussions on Indian democracy."

On the other hand, the Election Commission, represented by senior advocate Rakesh Dwivedi, argued in court that it was not against the instrument as such, but had opposed the "anonymity attached to it" from its very inception. Dwivedi added that the scheme "legalises anonymity" but the right to vote means making an informed choice - knowing the candidate was only "half of the exercise" and citizens must know the parties which are funding the candidates. The poll panel also claimed that electoral bonds made the commission's job of tracking donations from overseas and government companies - both legally barred at present - pretty difficult.

How is the Centre defending this instrument?

The government has taken an opposite stand to the poll panel, submitting that the scheme was meant to "eradicate black money in political funding" - India's election expenses are among the highest in the world - and donor anonymity was necessary to ensure that funds flow in to meet the country's burgeoning poll expenses.

"We have no policy of state funding of elections. Funds are received from supporters, affluent persons and companies. They all want their political party to win. If their party does not win then they apprehend some repercussions and hence secrecy or anonymity is required," Attorney General KK Venugopal had told the bench, led by Chief Justice Ranjan Gogoi, on Wednesday.

According to him, the allegations that nobody would know about the donors was wrong as the Income Tax department will have access to this information - the instrument is, after all, purchased through proper banking channels using white money and political parties have to file returns before the poll panel giving accountability on how much money has come through electoral bonds.

"So far as the Electoral Bond Scheme is concerned, it is the matter of policy decision of the government and no government can be faulted for taking policy decision," he had reportedly added.

What is the top court's stand?

At the hearing today, the Supreme Court said that if the identity of the buyers of electoral bonds is not known, the efforts of the government to curtail black money in elections would be "futile". Furthermore, it not only directed the Finance Ministry to reduce window of purchasing electoral bonds from 10 days to five days in April-May, but also said that it will examine the changes made in the law [the amendments] to ensure the balance does not tilt in favour of any party.